Preparation of T-accounts, income statement, and balance sheet. Zealock Bookstore opened a bookstore near a college campus on July 1, Year 10. Transactions and events of Zealock Bookstore during Year 10 appear below. The firm closes its books on December 31 of each year and uses the calendar year as its reporting period.

(1) July 1: Receives \(\$ 25,000\) from Quinn Zealock for 10,000 shares of the bookstore's \(\$ 1\)-par value common stock.

(2) July 1: Obtains a \(\$ 30,000\) loan from a local bank for working capital needs. The loan bears interest at 6 percent per year. The loan is repayable with interest on June 30, Year 11.

(3) July 1: Signs a rental agreement for three years at an annual rental of \(\$ 20,000\). Pays the first year's rent in advance.

(4) July 1: Acquires bookshelves for \(\$ 4,000\) cash. The bookshelves have an estimated useful life of 5 years and zero salvage value.

(5) July 1: Acquires computers for \(\$ 10,000\) cash. The computers have an estimated useful life of 3 years and \(\$ 1,000\) salvage value.

(6) July 1: Makes security deposits with various book distributors totaling \(\$ 8,000\). The deposits are refundable on June 30, Year 11 if the bookstore pays on time all amounts due for books purchased from the distributors between July 1, Year 10 and June 30, Year 11.

(7) During Year 10: Purchases books on account from various distributors costing \(\$ 160,000\).

(8) During Year 10: Sells books costing \(\$ 140,000\) for \(\$ 172,800\). Of the total sales, \(\$ 24,600\) is for cash and \(\$ 148,200\) is on account.

(9) During Year 10: Returns unsold books and books ordered in error costing \(\$ 14,600\). The firm had not yet paid for these books.

(10) During Year 10: Collects \(\$ 142,400\) from sales on account.

(11) During Year 10: Pays employees compensation of \(\$ 16,700\).

(12) During Year 10: Pays book distributors \(\$ 139,800\) of the amounts due for purchases on account.

(13) December 28, Year 10: Receives advances from customers of \(\$ 850\) for special order books that the bookstore will order and expects to receive during Year 11.

(14) December 31, Year 10: Records an appropriate amount of interest expense on the loan in (2) for Year 10.

(15) December 31, Year 10: Records an appropriate amount of rent expense for Year 10.

(16) December 31, Year 10: Records an appropriate amount of depreciation expense on the bookshelves in (4).

(17) December 31, Year 10: Records an appropriate amount of depreciation expense on the computers in (5).

(18) December 31, Year 10: Records an appropriate amount of deposit expense from (6).

(19) December 31, Year 10: Records an appropriate amount of income tax expense for Year 10. The income tax rate is 40 percent. The taxes are payable on March 15 , Year 11.

a. Open T-account and enter the 19 transactions and events above in the T-accounts. Cross reference the entries using the numbers of the transactions and events above.

b. Prepare an income statement for Year 10 .

c. Enter in the T-account the entries to close out the revenue and expense accounts to retained earnings on December 31, Year 10.

d. Prepare a balance sheet on December 31, Year 10. Classify assets and liabilities as current and noncurrent.

e. Evaluate the operating performance for Year 10 and financial health of Zealock Bookstore at the end of Year 10.